A Venezuelan accountant pleaded guilty Wednesday to charges that he helped a Connecticut-based hedge fund adviser attempt to cover up a massive, five-year pyramid scheme that could cost investors hundreds of millions of dollars.
Juan Carlos Guillen Zerpa was accused of falsifying a document to throw off federal investigators targeting Francisco Illarramendi, a Venezuelan-American financier who used unregistered hedge funds in Stamford, Conn., as cover for one of the biggest frauds in state history.
Guillen, who was the managing partner of a Venezuelan accounting firm, wore a beige prison jumpsuit and had his hands cuffed behind his back as he was led into the U.S. federal courtroom in Bridgeport. An interpreter translated proceedings into Spanish for him, although he told the judge in English that he accepted his guilt, saying: "Absolutely, yes, your honor."
U.S. prosecutors in Connecticut have called the case against Illarramendi the state's biggest white-collar federal prosecution. The 42-year-old New Canaan man was accused of transferring money among investment accounts without telling clients to cover up huge financial losses and then falsifying documents to deceive investors, creditors and investigators. A pension fund for Venezuela's state oil workers accounted for most of the investment totaling hundreds of millions of dollars.
Illarramendi, who served as an adviser to Venezuela's government until 2004, pleaded guilty in March to criminal charges including several counts of fraud and conspiracy to obstruct justice. He faces up to 70 years in prison.
As one of several co-conspirators, Guillen, 44, expected to receive $1 million for agreeing to sign a fabricated letter indicating falsely that one of the funds had made $275 million in outstanding loans to Venezuelan companies, prosecutors said. A payment of $250,000 for Guillen had already been delivered when he was arrested in March by FBI agents in Florida _ money he agreed to forfeit as part of the plea agreement.
In January, he told the U.S. Securities and Exchange Commission that the assets were real despite knowing they did not exist, according to prosecutors.
"There were no loans, and Mr. Guillen and others knew that," prosecutor Richard Schechter told U.S. District Judge Stefan Underhill.
Guillen pleaded guilty to conspiracy to obstruct an official proceeding of the U.S. Securities and Exchange Commission. He faces a maximum sentence of 20 years in prison and a fine of up to $2.5 million. The plea agreement does not put a lower cap on any prison sentence, although he waived a right to appeal a sentence involving less than 33 months in prison. Prosecutors also agreed not to pursue any additional charges against him.
Guillen, who was been in federal custody since his arrest, was ordered released on $1.35 million bond, secured by $550,000 in cash and property including a home Guillen owns in Florida. He is to remain under home confinement in Miami with electronic monitoring until sentencing on July 22. As a convicted felon, he is expected to be deported after serving any sentence.
His attorney, Robert Targ of Miami, said afterward that he could not comment on the case.
Another alleged co-conspirator, Venezuelan real estate manager Juan Carlos Horna Napolitano, was arrested in March and is awaiting trial. Authorities say Guillen and Horna conspired to make sure the companies that purportedly owed the missing money would support the story if contacted by federal investigators.
Investors are still waiting to find out exactly how much has been lost, but the SEC has said the gap between the funds' liabilities and assets could reach hundreds of millions of dollars. The attorney assigned to secure as many assets as possible recently received a three-month extension to file his accounting _ a task complicated by gaps in the paper trail, the mountains of documents and what investigators have described as an effort to conceal the fraud through deliberately complex transactions.